The Reserve Bank of India (RBI) on Sunday urged the public to not hoard money following the government's decision to withdraw large denomination notes in an attempt to expose undeclared wealth.

With long queues outside banks across the country for exchanging 500 and 1,000 rupee notes that the government abolished in a decision made Tuesday evening, the government has urged people to keep calm.

The government also today announced that the cash withdrawal limit will now be increased from Rs 2,000 to Rs 2,500 per transaction.

The banned denominations made up more than 80 per cent of the currency in circulation, Reuters reported.

The RBI has, however, stated that small denomination currency notes were available with both the central bank and with other lenders and hence there was no reason to panic.

Meanwhile, Mamata Banerjee, chief minister of India's eastern state of West Bengal called the situation "nothing short of an emergency".

"I have never seen such a thing. People have money in their accounts but can't access it. They can't pay for treatment of a family member in hospital, weddings have been put on hold, daily business has taken a beating," Reuters reported her as saying.

Indian Prime Minister Narendra Modi's said that the move was also aimed at curbing illegal political donations that fund India's elections.

Current 500 and 1,000-rupee notes can be redeemed at banks and post offices until December 30.